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September 28, 2018

Foreign exchange market highlights in August and September 2018

When it comes to transferring money internationally, it’s important to stay up to date with the most recent changes in foreign exchange markets. This way, you’ll be able to plan the best time to send, and more money makes it home.

To help keep you informed, we’re sharing factors that may affect the exchange rates of currencies you’re sending right now. For certain countries, you may even want to choose to send money to be received in USD instead of other currencies, a feature currently available with Remitly in certain countries.

August and September FX Market in Review

August and September were relatively volatile months in the global foreign exchange markets. A number of currencies experienced wild swings in value due to long-running government decisions finally coming to a head, sudden destabilizing behavior in certain countries, or exposure to these unstable governments through foreign investment.

Argentine Peso (ARS)

In August, the ARS dropped, even though it had a relatively stable start to the month. This was due to the Argentine government asking for early payouts from the International Monetary Fund, which signaled to investors an inability for Argentina to meet its current debt obligations.

This request, which was unprecedented, in combination with Argentina’s central bank raising interest rates to 60%, sparked investors to divest their exposure to ARS, making the value drop.

Unfortunately, there isn’t a quick fix to help the value of ARS. For those who need to transfer money to loved ones in Argentina, services like Remitly is a good option, as they enable both USD and ARS to be received at a cash pick up location in the country.

Turkish Lira (TRY)

As you may have read, the Turkish Lira (TRY) experienced a fair amount of volatility recently, ultimately resulting in a decline in value. Concentrated investment in construction and infrastructure projects, rather than long-term domestic investment, caused some of this volatility.

Since the economy in Turkey began growing very fast, foreign governments decided to lend more money to the country, fueling the growth even further. But, as foreign borrowing increased and paying off interest on previous borrowings happened, the Turkish current account deficit increased substantially, which in turn made foreign borrowing more expensive.

The decline in TRY was a result of expensive foreign borrowing and lower economic growth causing investors to sell off TRY, making the value drop.

Indian Rupee (INR)

Throughout August, the Indian Rupee (INR) experienced a steady decline in value due to prior foreign investment in other countries that have recently experienced significant economic volatility.

The main reason for the drop in INR value was due to lending and investing in Turkey, as mentioned earlier in this article. Investors now understand the state of the Turkish economy, and some have lost faith in Turkey’s ability to make payments on existing debts. Thus, investors are selling off INR to reduce their exposure to Turkey’s economic uncertainty.

Once investors started selling off INR, the value of it dropped, resulting in significant increases in rupee exchange rates between other large, global currencies.

South African Rand (ZAR)

Due to recent political turmoil and negative economic growth, the South African Rand (ZAR) has experienced a significant devaluation. Since the uncertainty around the South African government’s land expropriation policies is continuing, the ZAR is decreasing in value. Additionally, the exposure to the problems in Turkey has not helped their situation, adding on to the already-volatile conditions in the country.